Belgium – Bitcoin Trading Exempt from VAT … for now

In a recent decision issued for an online Bitcoin trading platform, the Belgian tax authorities have confirmed that the trading of Bitcoins and other virtual currencies is similar to the activity of an intermediary negotiating in securities and other negotiable instruments and, as a consequence, is exempt from VAT under the Belgian VAT code provision implementing Article 135(1)(d) of the EU VAT Directive. As a result, the activities should be treated as exempt from VAT and Bitcoin and alike trading platforms should not charge VAT to their customers with respect to their exchange services. On the other hand, those platforms have no right to deduct the input VAT paid in relation to their exchange activity.

The Belgian tax authorities also clarified that Bitcoins and other forms of virtual currencies are not regulated in Belgium and should not be considered as legal means of payment.

Although the decision was taken in an individual file, it confirms the position of the Minister of Finance on Bitcoin trading as outlined in a Parliamentary Questions that is publically released.

Note that this decision only deals with Bitcoin trading activities and not with the VAT treatment of transactions between the merchants and their business or residential customers.

The position of the Belgian tax authorities is very welcomed by the owners of the various digital platforms facilitating trade of virtal currencies as the VAT charge would make their services too expensive and not competitive with platforms operated from the US or other countries which do not levy VAT in connection with these types of services. However, business would do well to remember the potential impact on the recovery of VAT incurred on related costs, such as IT, premises, etc.

At the same time, the Belgian tax authorities outlined, that this position might change in the future due to the harmonisation efforts on European level.

Currently in the EU, the VAT treatment of the trading with virtual currencies is not harmonised. One approach taken by countries like the UK or Belgium is to exempt these transaction from VAT. According to the other approach represented by Poland or Estonia, the trading of virtual currencies should be subject to VAT. It is expected that more clarity and harmonisation in this regard should come from ongoing discussions in the EU VAT Committee and from the European Court of Justice (ECJ). According to the European specialists, a consistent approach may not be achieved in the short term.

Since currently the VAT implications of the transactions involving virtual currencies are not harmonised and also still not clarified in many countries, we are monitoring the development in various countries as well as on the European level in order to understand all potential queries and risks our clients might have, in order to be able to support them in this “grey” area.

Should you be facing some issues, or should you be interested to obtain more information concerning virtual currencies and/or discuss this topic, please contact me or Michaela Merz at michaela.merz@ch.pwc.com (Direct +41 58 792 4429).

About Sophie Claessens

Senior Tax Manager PricewaterhouseCoopers Tax Consultants Belgium email: sophie.claessens@be.pwc.com Mobile: +32 473 91 05 67 Office: +32 3 259 3169

Sophie Claessens is an international VAT advisor, based in Antwerp, Belgium, with a particular focus on business-to-consumer industries, including telecommunications, media, internet and e-commerce. She supports major industry players on sector-specific issues, including VAT compliance at both an operations and strategic level, and is directly involved in policy work for businesses in these industries, both at the Belgian level and at the level of the European Commission. She is responsible for indirect taxes in the communications sector at PwC Belgium and is a driver of PwC's Business Working Group on the EU 2015 VAT changes. She has authored articles for publication in Belgian and international tax journals.